5. Mortgage Loans

Griffin’s mortgage loans, which are nonrecourse, consist of:


	Feb. 29, 2016		Nov. 30, 2015

Variable rate mortgage, due October 2, 2017 *	$	6,172	$	6,217
Variable rate mortgage, due February 1, 2019 *		10,537		10,610
Variable rate mortgage, due August 1, 2019 *		7,452		7,501
Variable rate mortgage, due January 27, 2020 *		3,699		3,729
Variable rate mortgage, due January 2, 2025 *		21,120		19,385
Variable rate mortgage, due September 1, 2025 *		13,979		11,457
5.09%, due July 1, 2029		7,291		7,385
5.09%, due July 1, 2029		6,146		6,226
4.33%, due August 1, 2030		17,852		17,926
Total nonrecourse mortgage loans	$	94,248	$	90,436

*Griffin entered into interest rate swap agreements effectively to fix the interest rates on these loans (see below).

On December 10, 2015, Griffin received proceeds (the "Webster Earn-Out") of $2,600 related to the mortgage obtained by one of its subsidiaries with Webster Bank (the "2015 Webster Mortgage") on its property at 5220 Jaindl Boulevard ("5220 Jaindl Boulevard"), an approximately 280,000 square foot industrial/warehouse building in the Lehigh Valley of Pennsylvania. The 2015 Webster Mortgage closed on September 1, 2015, at which time initial proceeds of $11,500 (before transaction costs) were received. At the time of the mortgage closing, Griffin had leased approximately 196,000 square feet of 5220 Jaindl Boulevard. The Webster Earn-Out was subsequently received by Griffin when the tenant that leased that space exercised its option to lease the balance of the building. Griffin agreed that it would enter into a master lease with its subsidiary that owns 5220 Jaindl Boulevard should the lease at 5220 Jaindl Boulevard expire and not be renewed. The master lease would be co-terminus with the 2015 Webster Mortgage. The 2015 Webster Mortgage has a ten year term with monthly payments based on a twenty-five year amortization schedule. The interest rate for the 2015 Webster Mortgage is a floating rate of the one month LIBOR rate plus 1.65%. At the time the 2015 Webster Mortgage closed, Griffin also entered into an interest rate swap agreement with Webster Bank for a notional principal amount of $11,500 at inception to fix the interest rate at 3.77% on the initial funds advanced under the 2015 Webster Mortgage. At the time the Webster Earn-Out was received, Griffin entered into another interest rate swap agreement with Webster Bank for a notional principal amount of $2,600 to fix the interest rate on the Webster Earn-Out at 3.67%. The two interest rate swap agreements effectively fix the interest rate on the 2015 Webster Mortgage at 3.75% over the remainder of the mortgage loan’s ten year term.

On December 11, 2015, Griffin received proceeds (the "First Niagara Earn-Out") of $1,850 related to the mortgage obtained by two of its subsidiaries with First Niagara Bank ("the 2025 First Niagara Mortgage") on its properties at 4270 Fritch Drive ("4270 Fritch Drive") and 4275 Fritch Drive ("4275 Fritch Drive"). The 2025 First Niagara Mortgage closed on December 31, 2014, at which time proceeds of $10,891 (before transaction costs) were received, in addition to $8,859 used to refinance the existing mortgage on 4275 Fritch Drive with First Niagara Bank. The 2025 First Niagara Mortgage is collateralized by 4270 Fritch Drive, an approximately 303,000 square foot industrial/warehouse building, and 4275 Fritch Drive, an adjacent approximately 228,000 square foot industrial/warehouse building in Lower Nazareth, Pennsylvania. At the time of the mortgage closing, approximately 201,000 square feet of 4270 Fritch Drive was leased. The First Niagara Earn-Out was subsequently received by Griffin when the remaining vacant space of approximately 102,000 square feet was leased. Griffin agreed to enter into a master lease with its subsidiaries that own 4270 and 4275 Fritch Drive in order to maintain a minimum net rent equal to the debt service on the 2025 First Niagara Mortgage. The master lease would be co-terminus with the 2025 First Niagara Mortgage. The 2025 First Niagara Mortgage has a ten year term with monthly payments based on a twenty-five year amortization schedule. The interest rate for the 2025 First Niagara Mortgage is a floating rate of the one month LIBOR rate plus 1.95%. At the time the 2025 First Niagara Mortgage closed, Griffin entered into an interest rate swap agreement with First Niagara Bank that, combined with an existing interest rate swap agreement with First Niagara Bank, effectively fixed the rate of the 2025 First Niagara Mortgage at 4.43% over the mortgage loan’s ten year term. At the time the First Niagara Earn-Out was received, Griffin entered into another interest rate swap agreement with First Niagara Bank for a notional principal amount of $1,850 to fix the interest rate on the First Niagara Earn-Out at 3.88%. The combination of the three interest rate swap agreements effectively fixes the interest rate on the 2025 First Niagara Mortgage at 4.39% over the remainder of the mortgage loan’s ten year term.

On July 29, 2015, a subsidiary of Griffin closed on a new nonrecourse mortgage with 40|86 Mortgage Capital, Inc. ("the 40|86 Mortgage") for $18,000. The 40|86 Mortgage refinanced an existing 5.73% nonrecourse mortgage which was due on August 1, 2015 and was collateralized by three industrial buildings totaling approximately 392,000 square feet ("75 International Drive," "754 Rainbow Road" and "758 Rainbow Road") in New England Tradeport, Griffin’s industrial park located in Windsor and East Granby, Connecticut. The 40|86 Mortgage is collateralized by the same three properties. Griffin received proceeds of $14,875 at closing (before transaction costs), which were applied to the payoff of the maturing 5.73% nonrecourse mortgage of $17,891. The remaining $3,125 of loan proceeds was placed in escrow at closing. In the fiscal 2015 fourth quarter, as per the terms of the 40|86 Mortgage, $2,500 of the escrowed proceeds was released to Griffin when the tenant that was leasing approximately 88,000 square feet on a month-to-month basis in 754 Rainbow Road extended into a long-term lease for that space and $25 of the escrowed proceeds was also released to Griffin upon renewal of insurance coverage on the mortgaged properties. The remaining $600 of mortgage proceeds deposited into escrow at closing was released to Griffin subsequent to the end of the 2016 first quarter when tenant improvement work for the full building tenant in 758 Rainbow Road was completed. The 40|86 Mortgage has a fifteen year term with monthly payments based on a thirty year amortization schedule. The interest rate for the 40|86 Mortgage is 4.33%.

As of February 29, 2016, Griffin was a party to several interest rate swap agreements related to its variable rate nonrecourse mortgages on certain of its real estate assets. Griffin accounts for its interest rate swap agreements as effective cash flow hedges (see Note 2). No ineffectiveness on the cash flow hedges was recognized as of February 29, 2016 and none is anticipated over the term of the agreements. Amounts in accumulated other comprehensive income (loss) will be reclassified into interest expense over the term of the swap agreements to achieve fixed rates on each mortgage. None of the interest rate swap agreements contain any credit risk related contingent features. In the 2016 and 2015 first quarters, Griffin recognized losses (included in other comprehensive loss) before taxes of $1,812 and $518, respectively, on its interest rate swap agreements. As of February 29, 2016, $1,231 was expected to be reclassified over the next twelve months from accumulated other comprehensive loss to interest expense. As of February 29, 2016, the net fair value of Griffin’s interest rate swap agreements was $4,240 and is included in other liabilities on Griffin’s consolidated balance sheet.